Labor: How to properly handle references for terminated employees

Handling references for former employees is becoming increasingly complicated. For example, not disclosing an employee’s violent or improper conduct can expose your company to liability if that employee thereafter injures someone at the next employer. On the other hand, disclosing information about a former employee that is arguably untrue could lead to defamation and other claims from the former employee. In light of this conundrum, all employers must decide how to handle requests for references for terminated employees and there may not be a “one size fits all” answer.

Recently, there has been a wave of litigation against companies for not disclosing certain inappropriate behavior of their former employees. A typical situation is when an employer terminates an employee for repeated physical violence. Then, his new employer asks for a reference of that employee, and the employee’s violent tendencies are not disclosed (or better yet, they state that the employee was a good employee). Then the former employee ends up physically harming a co-worker at his new employer. In this situation, the new employer may have a claim against the former employer.

The line between disclosing too much about a former employee (and exposing the company to a defamation lawsuit) and not saying anything at all is a fine line. To potentially get around this, in the event you feel compelled to share information about a former employee, perhaps consider the following two examples:

Bad Reference: Mr. Smith was terminated from the company for physically assaulting his co-worker on a business trip.

Better Reference: Mr. Smith was terminated from the company after an investigation into allegations that he physically assaulted a co-worker on a business trip.

To minimize potential liability, many companies have adopted a “name, rank and serial number” policy, providing only the dates of employment, title, job duties and perhaps the salary of the former employee. Under this policy, the company should not respond to questions about work performance, divulge the reasons for the employee’s departure or provide any personal information about the employee.

Of course, in situations where physical violence is an issue, some thought must be given as to whether there may be an obligation to disclose the prior employee’s conduct to the potential new employer. In those limited circumstances, however, it is highly recommended to contact your attorney, as the decision of whether or not to disclose such conduct may be very fact-specific and depend on the jurisdiction and the industry.

Moreover, only a single individual or small group should be authorized to respond to reference requests for terminated employees. This ensures that the policy is implemented consistently and correctly. Employees should be trained on who at the company is authorized to provide employee references. The designated person should also not respond to any reference request until written authorization is received from the former employee.

Additionally, with the increased use of applications such as LinkedIn, a policy prohibiting or limiting an employee’s practice of making recommendations to any current or former employee may be prudent. In other words, you will want to avoid a supervisor giving a glowing recommendation to an employee who was just terminated for poor performance or who was otherwise terminated for cause.

Finally, all requests for references should be documented by including the name of the party requesting the information, the purpose for which the reference is requested and the information being provided by the company.